 Thirty years ago, many economists argued that inflation was a kind of minor inconvenience and that the cost of reducing inflation was too high a price to pay. No one would make those arguments today. |
| Inflation is lower and more stable and the real business cycle fluctuations are more modest. |
| The more competitive value of the dollar turned around the trade deficit. |
| We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation. |
| First, I think the science of monetary economics has clearly gotten better. |
| If the Federal Reserve pursues a strong dollar at home while the dollar becomes more competitive in global markets, we can achieve both price stability and a more balanced path of economic growth. |
| But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an increase in exports this year and in 2007 to sustain the economy's current pace of expansion. |
| Domestic inflation reflects domestic monetary policy. |
| An increase in the relative price of products from the low wage manufacturers in Asia and Latin America will also make those products less attractive to American consumers. |
